A recently uncovered memo to Treasury Secretary Tim Geithner reveals that he approved a policy that ensures that the “existing common equity holders will not have access to any positive earnings from the G.S.E.’s in the future.” Experts say this previously undisclosed arrangement could violate securities laws and amounts to a de facto nationalization of the companies.

The memo was addressed to Timothy F. Geithner, then the Treasury secretary, from Jeffrey A. Goldstein, then the under secretary for domestic finance. In discussing Fannie and Freddie, the beleaguered government-sponsored enterprises rescued by taxpayers in September 2008, the memo referred to “the administration’s commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.’s in the future.”

The memo, which was produced in a lawsuit filed by Fannie and Freddie shareholders, was dated Dec. 20, 2010. Securities laws require material information — that is, information that might affect an investor’s view of a company — to be disclosed. That the government would deny a company’s shareholders all its profits certainly seems material, but the existence of this policy cannot be found in the financial filings of Fannie Mae. Neither have the Treasury’s discussions about the future of the two finance giants mentioned the administration’s commitment to shut common stockholders out of future earnings. Freddie Mac’s filings do refer, albeit incompletely, to the administration’s stance, noting that the Treasury “has indicated that it remains committed to protecting taxpayers and ensuring that our future positive earnings are returned to taxpayers as compensation for their investment.” Note that this reference does not say all earnings.

Lewis D. Lowenfels, a securities law expert in New York, found this statement insufficient. “If there is disclosure regarding future Fannie and Freddie earnings and the administration has a commitment that existing Fannie and Freddie common equity holders will never receive any future positive earnings,” he said, “this commitment would be material to investors and should be disclosed.”

When the memo was written, plenty of people held these stocks. Regulatory filings show that 18,000 investors held 1.1 billion shares of Fannie Mae common stock, while just over 2,100 investors held 650 million Freddie Mac shares.

Thousands of investors in the companies were not made aware of the memo, which outlined a policy that deprived them of future earnings. Securities laws require the disclosure of any “material” information that might affect an investor’s view of a company.

James Cummins, a leading securities lawyer who has litigated against Fannie and Freddie since 2004 on various issues, said in an interview that the information in the memo would have been of great interest to potential investors at the time.

“It’s material information because it was going to tell people who might want to buy stock, ‘Hey, by the way, you’re not going to get any dividends and all of the earnings of the company are going to U.S. Treasury,’” he said.

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Critics accuse Fannie, Freddie, and the FHFA—which still guarantee nine out of every 10 U.S. mortgages—of crowding out competition from private mortgage insurers.

“It’s like a sick person going into a hospital, being cured of the illness, and then having the hospital refuse to release the patient,” Cummins said.

“It’s so different from what the entrepreneurial, capitalistic dream of the U.S. is supposed to be,” he added. “It’s just totally different from what anybody anticipated was going to happen.”

Cummins said Treasury’s control of the earnings, coupled with presidential appointments to the board of directors for Fannie and Freddie, more closely mirrors nationalized industries “in the Soviet Union or in Mexico.”